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Thoughts On Article “Perfect FOREX Portfolio”

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qattack

Customer, bbp_participant, community, 42 replies.

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6 years ago #113890

I read the article “Perfect FOREX Portfolio” and have some ideas about this. I haven’t purchased StrategyQuant yet, but plan to in six weeks or so, assuming my budget remains intact.

 

I am a newb to FOREX trading and I can only draw off my experience playing poker professionally for the last 20 years and sports betting (which I failed due to selection process, but my wagering is sound if I know the expected probabilities.)

 

In poker, you theoretically “never” pass on a +EV situation, no matter how small. There are practical exceptions, but this rule is correct when you are properly bankrolled and you have your full attention focused on a single game (versus playing 16 tables on the Internet).

 

With FOREX trading, if you use something similar to Kelly Criterion, wouldn’t the optimal strategy be to have as many EA rules as possible? And by that I mean 1000 rules. (I’m neglecting the management nightmare here–just brainstorming)

 

Unlike poker (but similar to sports betting), you can divide your “wagers” almost infinitely as a percentage of your bankroll. Most of these, of course, would have lower R.O.I. and higher drawdown.

 

This allows you to “bet” more when your edge is larger and less when smaller. of course, if the R.O.I. and resulting wager are too small, depending on your bankroll, it may not be worth your time to develop the rule in the first place.

 

But by placing an incredibly high number of wagers (using a correct wagering scheme), extreme drawdown for each individual strategy is mitigated and relatively insignificant.

I have not yet purchased StrategyQuant and this post may have been for naught if rule development and testing times are lengthy, but the rule should hold: the more strategies the better (when paired with a correct wagering plan).

 

This article raises more questions than it answers (not complaining, that’s a good thing!). This pair obviously know what they are doing. I’ve completed one read-through of the StrategyQuant and it looks like an incredible tool. However, something that struck me is that there is MUCH more that can be learned about correct and efficient methods to use SQ than is contained in the manual (and articles).

 

The manual is fine for what it is, but I’m guessing there are methods that can be followed that will result in a HUGE increase in efficiency. I’m sure someone who has been trading professionally for years can use SQ much more efficiently than a newb like myself, but I’m also sure there are basic methods that are understandable with a little effort that will result in much faster and effective EA development. Has this been discussed?

 

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tomas262

Administrator, sq-ultimate, 674 replies.

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6 years ago #131173

I read the article “Perfect FOREX Portfolio” and have some ideas about this. I haven’t purchased StrategyQuant yet, but plan to in six weeks or so, assuming my budget remains intact.

 

I am a newb to FOREX trading and I can only draw off my experience playing poker professionally for the last 20 years and sports betting (which I failed due to selection process, but my wagering is sound if I know the expected probabilities.)

 

In poker, you theoretically “never” pass on a +EV situation, no matter how small. There are practical exceptions, but this rule is correct when you are properly bankrolled and you have your full attention focused on a single game (versus playing 16 tables on the Internet).

 

With FOREX trading, if you use something similar to Kelly Criterion, wouldn’t the optimal strategy be to have as many EA rules as possible? And by that I mean 1000 rules. (I’m neglecting the management nightmare here–just brainstorming)

 

Unlike poker (but similar to sports betting), you can divide your “wagers” almost infinitely as a percentage of your bankroll. Most of these, of course, would have lower R.O.I. and higher drawdown.

 

This allows you to “bet” more when your edge is larger and less when smaller. of course, if the R.O.I. and resulting wager are too small, depending on your bankroll, it may not be worth your time to develop the rule in the first place.

It’s an interesting concept. The problem I see here is that you never know in advance when your edge is larger or smaller – always only in hindsight. Even if you are in a drawdown and everything indicates you are in a bad period with your system, the very next trade can be a monster winner that eliminates drawdown and makes some extra. Also the bottom line here is that no money-management method can ever substitute edge that is required to be able to make more money than lose in the long run. I mean even if you split your capital among 1000 strategies at the same time you still need them all to have an edge and they all need to be robust as much as possible. But the truth is it’s always good to have a portfolio of strategies instead of just betting everything on one and hoping it will make your equity always going straight up.

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